Apollo Hospitals rules out further stake sale

Apollo Hospitals Enterprise (AHEL) has ruled out further dilution of promoters’ stake in the company. The company also said its Rs 1,337-crore stake sale of Apollo Munich Health Insurance with mortgage major HDFC will be concluded by October. Following these stake sales, the promoters’ pledged position will come down from a high of 76% to 54% by October and eventually to 20% by November or December, company sources said here.

The company also ruled out any capex during the fiscal and has decided to consolidate its operations further to reduce the overall corporate debt, CFO A Krishnan said. Speaking to FE, Krishnan said: “As said earlier, our commitment towards bringing down the promoters’ pledged shares to 20% from a high of 76% a few months ago. With these two transactions — stake sale in Apollo Munich as well as promoters’ holding by 3.6% (50 lakh equity shares) today, we ensure the shareholders that we are in a comfortable position, particularly in terms of promoters’ holding in the company.”

To a question, he said, after dilution of 3.6% and the sale proceeds from Apollo Munich, the overall promoters’ group debt would be around Rs 350-400 crore or equivalent to 20% of pledged shares. Since the promoters’ group has interests in other areas such as education, and health and lifestyle, among other areas, one has to consider that it will be debt-free as far as promoters’ group is considered, he added.

After the dilution of 3.6% stake by Suneeta Reddy-led promoters’ group through a bulk deal, the promoters’ holding in the company will come down to 30.8% from 34.40%. The company will not dilute promoters’ holding any further, he said. The company expects to rake in Rs 744 crore through the 3.6% stake sale.

“Most of the funds realised through the stake sale in Apollo Munich as well as through the 3.6% stake sale will be utilised to reduce the promoters’ debt,” Krishnan said.

In response to another question, he said: “The overall debt at the corporate level is estimated to be around Rs 3,000 crore. We expect the company to post a strong Ebitda during the fiscal, which is estimated to be around Rs 1,200 crore. After interests and tax cuts, we hope to have a strong cash flow and we will bring down the debt by Rs 500 crore to Rs 2,500 crore by March 2020 (in the current fiscal). Eventually, our aim is to further bring it down to Rs 2,000 crore in the next fiscal and we are working towards this through operational exercises and cost cutting measures.”

On whether the company is looking at any investments in the current fiscal to add new hospitals/beds, Krishnan said: “There won’t be any major capex, may be around Rs 200 crore. Most of our expansion plans have been done already over the last three years. Our aim is to bring down the overall debt further as well improve the margins further.”

The company now has around 8,000 beds and nearly 30% of these beds have been added in the last three years to our expansion, Krishnan added. Earlier, in a communication to the stock exchanges, the company said, “We have always maintained that our over-arching priority is to work in the best interest of investors and stakeholders, and to maximise value or them. We believe this decisive step in bringing down pledge levels will best serve the interests of all stakeholders.”

It further said the promoters’ family stays fully committed to the vision of our founder, Pratap C Reddy. “We are focused on the growth of this enterprise and its performance with specific thrust on all three verticals — healthcare services, standalone pharmacies and retail health,” it said.

Apollo Hospitals had reported a 32% growth in its net profit for the quarter ended June 30, 2019, to Rs 79.30 crore compared with Rs 60.20 crore in the same quarter last fiscal. Revenue grew 17% to Rs 2,229.20 crore against Rs 1,910.40 crore in the same quarter last fiscal.